'Alarming rise' in prepayments lost by consumers: CASE

31 Jul 2017

California Fitness abruptly closed all of its outlets in Singapore in July 2016. Photo credit: CNA

SINGAPORE: There has been an “alarming rise” in the amount of prepayments reported lost by consumers when businesses close down, the Consumers Association of Singapore (CASE) said on Monday (Jul 31).

The amounts lost were S$1.05 million in 2014, S$1.9 million in 2015 and S$3.59 million in 2016. For the first half of 2017, S$1.81 million was reported lost.

Many complaints from consumers who reported losses related to businesses becoming insolvent and failing to deliver the promised goods or services after collecting payment, CASE president Lim Biow Chuan said in the press release.

Consumers need to be more aware of the risks when making advance payments, especially when transacting with businesses in industries where the highest amount of reported losses occurred, he said.

Topping this list at S$2.74 million is the motorcar industry, followed by fitness clubs at S$1.39 million, renovation contractors at S$1.02 million, travel industry at S$860,000, hair services sector at S$700,000 and furniture companies at S$620,000.

Mr Lim said that as not all affected consumers lodged their complaints, the reported losses “may represent only a fraction of the actual losses”.

He gave the example of fitness chain California Fitness, which abruptly closed all of its outlets in Singapore last year.

CASE received about 600 complaints with about S$1.09 million of reported losses after the chain shut down, Mr Lim said.

"This represents a small fraction of the 27,000 members who were owed S$20.8 million in unused gym access and personal training sessions as reported by the liquidators," he said.

He offered some tips for consumers: To negotiate for progressive payments instead of paying in full upfront; to find out if a business offers any insurance or escrow arrangements to protect prepayments; to choose the "pay as you use" option instead of  prepaid packages; and to always ask about the refund policy for the prepayment.

"We hope that consumers can also take steps to protect themselves by understanding the risk of prepayments and their rights and obligations under a contract," said Mr Lim.


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